Gwen van Eijk

A cure for criminal corporations?

Studies suggest there is little economic value in getting more women on corporate boards. From a criminological viewpoint, there may be good reasons for gender diversity.

Proponents of gender diversity and quotas claim that corporations need talented women to keep up with the competition. Gender diversity would pay off. However, economic arguments for more women on boards of directors are shaky, Christina Hoff Sommers argues in an article ‘Let’s Not Oversell the Financial Benefits of Having Women on Corporate Boards’ (Atlantic Montly, also covered by NRC Handelsblad).

Sommers’ observations are, in short, the following. First, several studies suggest negative effects of female board members on firm performance and firm value. While female directors attend meetings more often and are more active in monitoring their firm, gender diversity did not mean better performance. In addition, the companies that had a quota for the share of women did less well in terms of performance and value and had younger and less experienced boards. Finally, the studies that do show a positive correlation between female board members and corporate success cannot claim a causal relation between the two. While Sommers acknowledges the good intentions of promoting gender diversity, she states that ‘business and financial leaders are supposed to be coolly objective and focused on economic reality’. Therefore, as there are no economic benefits, there are no reasons for quotas or other forms of positive discrimination.

And there her article stops. Please allow me to finish it. First, following Sommers’ argument that correlation is not causation, the fact that women quotas result in younger and inexperienced boards means just that. Apparently there are not enough older and experienced female candidates, but if there were, this problem would be solved. It certainly does not prove that the share of women causes value decline.

Second, Sommers pays little attention to the finding that female board members are more active in monitoring their firm. From a criminological point of view, this is important. Wim Huisman, criminologist and expert on organisational crime, has suggested that as more women gain access to high-status jobs we may see less white-collar crime. That is, if indeed women bring certain qualities (less risky behaviour) or values to work that prevent criminal behaviour. If, on the other hand, these women behave just like their male colleagues, nothing changes. Time will tell. But perhaps we’ll see better businesses because of female board members.

Third, Sommers warns not to ‘oversell the financial benefits of gender diversity’. What strikes me is the uncritical reliance on financial benefits as the measure of corporate success. How about: let’s not oversell the financial benefits, period! If indeed the demand for endless growth and profits led to risky behaviour and corporate crimes, would it not benefit society if we halted the incentives for big corporations to commit crimes, thus preventing enormous financial damages for society? It is disappointing that the negative correlation between gender diversity and economic value is automatically labelled as a problem. Of course, we need to uncover what explains the negative correlation between women on boards and economic success. But this is not bad news.